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Attracting foreign investment is a daily beauty contest : German Ambassador

4 June 2016 12:00 am - 0     - {{hitsCtrl.values.hits}}

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German Ambassador to Sri Lanka Dr. Jürgen Morhard, in an interview with Daily Mirror said that last year’s change of government brought about a dynamic relaunch of political relations between his country and Sri Lanka. Noting that the government of Sri Lanka is striving to strengthen the rule of law, he said Sri Lanka was well on its way to reforms.

Q How do you see the relationship between Sri Lanka and Germany after the change of government here?
Bilateral relations between Sri Lanka and Germany have always been very, very good, in particular between the civil societies. However, not long ago our political relations suffered some serious strains. Fortunately, last year’s change of the Sri Lankan government brought a dynamic re-launch in our bilateral relationship.

The Government of Sri Lanka now stands for democratic values and reaches out again to its traditional western partners as well as to the rest of the world. Our bilateral relations and exchanges on a political level have intensified very quickly since then: The two foreign ministers have already met four times. President Maithripala Sirisena has visited Germany in February 2016. Four Members of the Parliament of the German Bundestag, visited Sri Lanka in April. We also held the first regional human rights seminar in Colombo chaired by the German Commissioner for Human Rights.

As a follow up to President Sirisena’s Berlin visit, a German Deputy Minister, along with a large business delegation, visited Sri Lanka this May. This is in response to a request by the government of Sri Lanka to increase the volume and value of Foreign Direct Investments (FDI).
 

I think Sri Lanka is doing a lot. There is a lot of political will and good intention. It is not up to me to make a judgment

 

Q  When talking about FDI, how conducive is economic and political stability of Sri Lanka for such investments in your view? 
Change in Sri Lanka has of course many aspects. One of them is the intention to strengthen transparency and accountability. The government is striving to reinforce the rule of law. It is trying its utmost to create a level playing field. Foreign companies are welcome to do business. I am delighted to report that the Embassy has informed German companies about the recent developments which have pathed the way for more opportunities in the last 15 months. Consequently, the interest in Sri Lanka has considerably increased: The companies have started again to look at Sri Lanka. They are exploring potential business opportunities which can be manifold in Sri Lanka. Some might prefer to target the local market whereas others will look at export potential from here. Those who are already in business with Sri Lanka will look at expansion.


But in a nutshell: Sri Lanka is well on its way to reforms. Of course they will need time. Rome wasn’t built in one day either. Attracting FDI is a daily beauty contest: Business delegations are visiting neighbouring countries, too. Sri Lanka has to compete every day with them. “Daily” means not to rest trying to improve the conduciveness for international business. Consequently, Sri Lanka will have to do its utmost to present itself as the preferred investment hub in the Indian Ocean. With the understanding that Sri Lanka’s domestic market is only limited, Sri Lanka has to offer substantial comparative advantages in being a hub to other countries. This includes special access to other regional markets in the region through preferential trade and service agreements. Otherwise, companies might invest in the targeted markets directly.

 

Consequently, Sri Lanka will have to do its utmost to present itself as the preferred investment hub in the Indian Ocean


Q Do you mean to say that the proposed trade pact called Economic and Technical Co-operation Agreement (ETCA) with India and the Free Trade Agreement with China are advisable for 
Sri Lanka to gain such access?

Yes, I think these agreements are not only advisable, they are indispensable. Otherwise, businesses will opt to go directly to those markets and countries instead of using the comparative economic advantage of Sri Lanka. Regional integration in trade has been the trigger for growing prosperity in many areas in the world. South East Asia is growing not because of its economic exchanges with distant western markets, but first of all because of the growing economic integration within the Asian region.
 

Q In your view, how does the situation in Europe affect Sri Lanka in terms of FDI flowing to Sri Lanka?
Economies are always following cycles. There are ups and downs. There is no need to be too pessimistic in the medium and long term with an economic downturn in some countries in Europe. Asia has the potential to sustainably become the economic power house of the world. In Asia we find demographically growing nations. Sri Lanka is located in the centre of potentially fast prospering markets in South Asia. Global companies are looking for growth potentials for sustainable business. Many German companies are already doing more business abroad than at home. If you take the demographic trends, Germany is an aging society. Thus, there are certain limits for market growth and development. The growth prospective for industrial development and prospering consumer markets is very positive in Asia. For this reason international companies have been looking at Asia for a long time.

 

GSP+ will not substitute marketing and continuous level of product quality. Not to forget the demand for the specific products from Sri Lanka
 

Q Earlier, you mentioned the importance of rule of law to ensure a level playing field for businesses. How happy are you with measures taken so far?
I think Sri Lanka is doing a lot. There is a lot of political will and good intention. It is not up to me to make a judgment. However, companies report to me that processes have become more open and transparent. However, insights to implement a fair and even level playing field for tenders are not yet a universal standard here. Individual companies report that not all tender and bidding regulations are strictly followed yet. But on the other hand, opportunities to complain, to seek justice or remedy in the judiciary seem to exist. However, legal procedures can be still very time consuming and costly. Nevertheless, I understand from German companies that they feel more positive about commercial and legal issues today. Moreover, legal issues among private businesses are often solved by arbitration.
 

Q In your view, how important is it for Sri Lanka to secure the GSP plus facility?
Having the GSP plus trade facility does not automatically mean increased trade volume overnight. You still need to first find a buyer for your products. GSP+ will not substitute marketing and continuous level of product quality. Not to forget the demand for the specific products from Sri Lanka. Sale pitches might become easier and more successful with GSP+ status. However, cost advantage is not the only selling point today in highly developed markets such as in Europe.
 

QRegarding the reconciliation process in Sri Lanka, what is the kind of role Germany intends to play?
Germany has been here as a longtime partner not only since the change of government. Since the early 2000s, the German Development Corporation has focused its support on the areas of peace building, social integration and reconciliation. The German support aims at contributing to address the root causes of conflict by supporting social cohesion and reducing disparities. We try to support frame conditions for a peaceful and inclusive development. Our assistance for social cohesion goes beyond helping to draft a national integration plan, language policies and educational reforms. Our spotlight is also on vocational training in the North and on structural assistance to SMEs. Germany has particular expertise to work with multi-stakeholders. Both vocational training and SME need strong involvements of the private sector, both corporates as well as chambers. And it is important to note that social integration and reconciliation is a task for all Sri Lankans. This cannot be reduced to government or donor programs.
 

Q What is the kind of role you seek to play regarding the evolution of a political solution based on your experience?
We have submitted quite a number of proposals for cooperation. Only recently – in May - our Commissioner for Human rights during a visit to Colombo offered assistance through our Ministry of Justice to reform the judicial system. It is now up to Government of Sri Lanka to specify what kind of assistance is feasible.


Moreover, our political foundations are returning to Sri Lanka. The Friedrich Naumann Foundation has reopened its office. Others are also exploring to expand their activities once again in Sri Lanka. The political foundations have a multitude of expertise to assist in capacity building and reforming political culture.
 

Q Anything being planned on electoral reforms?
We have offered legal assistance on the constitutional process as well. Again, the specific support needed to be identified in consultations with our partners.

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